The Functions and Roles of Futures Market in The Development of Soybean IndustryMr. Liu Xingqiang, President & CEO, Dalian Commodity ExchangeAugust 2009China is one of the largest soybean consumers and producers in the world. Hosting the World Soybean Research Conference in China conveys special significance not only for China, but also for the worlds soybean industry. The major theme of the World Soybean Research Conference is to discuss the development of soybean industry and related science and technology issues. As a futures exchange, what contributions can we make here? I truly appreciate the wisdom of the organizing committee of this conference in setting up discussions on the functions of futures market in the development of soybean industry. Before we discuss the functions of futures market in the development of soybean industry, please allow me to give you a briefing on the overall situation of the futures market development in mainland China and Dalian.Chinas futures market was initiated in early 1990s. In less than 20 years, the futures market in mainland China has become one of the most dynamic and influential emerging market in the world. In 2008, the total trading volume of the three commodity furutres exchanges in China, respectively in Dalian, Shanghai and zhengzhou, reached to 1.36 billion contracts, while the overall trade value amounted to RMB 71.9 trillion. According to the statistics of Futures Association Industry (FIA) in the United States, the trading volume of mainland Chinas commodity futures accounted for 36.5 % of the world total in 2008. In terms of trading volume, China is the second largest commodity futures market in the world, only second to the United States. Dalian Commodity Exchange (DCE) was established in 1993. It is a non-profit membership futures exchange. Currently, there are seven agricultural and chemical products listed in DCE, including soybean, soybean meal, soybean oil, corn, palm oil, LLDPE and PVC. In terms of trading volume, DCE is second largest agricultural futures market and the largest plastics futures market in the world. According to the statistics of Futures Industry Association (FIA), in 2008, DCE trading volume ranked No. 10 among 69 futures and options exchanges in the world.Now, lets move to the discussions on the functions of futures market in the development of soybean industry. I. The History and Development of DCE Soybean Futures MarketAs one of the earliest commodity futures in China, soybean futures have been in existence for the largest period. With the highest accumulated trading volume in Chinas futures market, it is also one of the best regulated futures products.On November 18, 1993, the day when DCE started its trading, soybean futures contract was listed and received active market response. During the following years, futures market in China experienced a period of chaotic development and reorganization. Many futures products were suspended or de-listed from the market. However, soybean futures have been kept due to the regulated operation and well-performed market functions. From 1999 to 2003, the domestic futures market was in a period of recovering growth. Because there were not many futures products in China during that period, the trading volume of soybean futures accounted for over 40% of the overall trading volume of all futures in China for five consecutive years. In one year, it accounted for 75% of the total trading volume in China. That period was named by Chinese futures professionals as the Soybean Era. In March 2002, along with the changes of the national policies on genetically modified agricultural products, DCE split the original soybean contract and listed Soybean No.1 Contract, which only allows the delivery of non-genetically modified soybeans. On December 22, 2004, DCE launched Soybean No. 2 Contract, which is mainly for imported soybeans and doesnt differentiate being genetically-modified or not. This improved the product series of soybean contracts.From 1993 till the end of 2008, the accumulated trading volume of soybean futures reached 990 million contracts and its overall trading value amounted to RMB 30.9 trillion. The numbers respectively represented 45.72% and 45.97% of DCE market share. According to FIA trading volume listing in 2008, DCE soybean futures ranked No. 2 among the top 20 agricultural products. In 2008, on comparable basis, the trading volume of DCE soybean futures accounted for 23% of that in CME Group of the United States, and was 13 times of that in Tokyo Grain Exchange of Japan. DCE is now the second largest soybean futures market in the world. In July 2000, DCE launched soybean meal futures. In January 2006, we launched soybean oil futures. The launch of soybean meal and soybean oil futures offers corresponding risk management tools for the whole soybean industry chains. From January to June this year, the trading